Relief for motorists as petrol prices cut

The company plans to reduce its pump prices by up to 2p a litre from today, on top of the 1p cut announced last week.

Rivals Morrisons, Sainsbury’s and Asda have made similar moves as firms use the forecourt as a battleground for getting shoppers through their doors.

Asda yesterday said Tesco was simply following its lead after it last week cut prices by up to 3p per litre across the UK. Its new national price cap of 132.7p per litre of unleaded applies to all 188 of its stations.

Luke Bosdet, from the AA, said prices were coming down slowly, but were still far too high for many motorists in rural areas – and it would be in supermarkets’ interests to bring prices down further.

He said: “The Railway Children will have had more transport opportunities than drivers in villages.

“ What with the taking away of rural subsidies from buses and cars being so expensive and no one has a horse – all you left with is going on foot or a bicycle.”

He added: “To be fair to the supermarkets some of the offers they have been offering in store would easily negate any cut in the fuel price.

“But for a lot of people who have set amounts that they spend on fuel, as they get towards the end of the week and think they are running low, rather than going to an out of town store, they think they will go to a local store and that’s where the supermarkets are falling down.

“If they are paying less to buy fuel than they should be passing that onto drivers because it then allows them leeway to go to their stores.”

The downward pressure on prices comes after recent financial turmoil caused a sharp slide in commodities.

Oil prices have tracked the decline in stock markets, with New York listed crude down to around $85 (£52) a barrel from $100 (£61) last month and $115 (£70) in May.

However, prices on Britain’s forecourts have not mirrored the oil price drop, with unleaded petrol costing on average 1.8 per cent more than in early April.

The AA said last week that the average cost of unleaded petrol last week stood at around 136.5p a litre, a penny short of the record seen in May. Diesel was more than 140p a litre.

The industry points out that some 60 per cent of the pump price is accounted for by fuel duty and VAT, with another 10 per cent going on delivery costs, marketing and profit margins. The weaker performance of sterling against the dollar has also offset the drop in the price of crude.

Commodity prices have slumped amid concerns the first-ever US debt rating downgrade will batter already weakening consumer confidence and hurt economic growth. However the long term outlook for fuel prices, the AA says, is up – to the point where it starts to become unaffordable.

Mr Bosdet said: “What we need is transparency, we need to see the oil price, the wholesale price and the pump price so we can see if we are getting a fair price for the fuel we buy. Maybe when we have transparency we will have to accept some hard realities, that it is getting incredibly expensive and we are going to have to find a way of dealing with it.”